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Supply of CME futures contracts for Ethereum; The volatile week awaits the second digital currency market


Ethereum futures trading on the Chicago Mercantile Exchange (CME) officially begins on February 8; What happened to Bitcoin three years ago in late 2017, and according to many, was one of the factors behind the rise and then the sharp fall in the price of Bitcoin. In the continuation of this article, we will briefly explain the option contracts and examine the possible impact of CME contracts on the price of Ethereum.

Digital Currency Exclusive – On December 1, 2017 (December 10, 1996), the Chicago Mercantile Exchange announced that on December 18, 2017, it will offer Bitcoin futures contracts. At the time of writing, the price of each bitcoin unit was around $ 10,500. 17 days later, exactly one day before the start of trading, ‌ Bitcoin reached its highest price in history, $ 19,700. The next day, the bitcoin began to decline, and at worst, the price fell to $ 3,000.

Supply of CME futures contracts for Ethereum;  The volatile week awaits the second digital currency market

In the case of Ethereum, on December 16, 2020, the Chicago Mercantile Exchange announced the launch of CME futures contracts for the market’s second-largest digital currency. At the time of the announcement, the price per unit of ether was around $ 600, and now this digital currency is trading in the range of $ 1,350 after reaching its highest price in history. So if history is to be repeated, this week will be crucial for Ether.

Supply of CME futures contracts for Ethereum;  The volatile week awaits the second digital currency market

Brief description of futures contracts

Future contracts are, to put it simply, contracts entered into between the buyer and the seller (issuer). The buyer of the futures contract expects the price to increase in the future and, according to the contract, pays a certain amount of an asset (eg ether) at the time of the contract, but at the expiration date (maturity date) specified in the contract. , Will be delivered.

The seller of the futures contract expects the price to decrease in the future, and according to the contract, the money receives a certain amount of an asset (eg ether) at the time of the contract, but the asset at the time of expiration (maturity date) specified in the contract. , Will deliver.

The main purpose of these contracts was to reduce the risk of producers and consumers so that they could procure their raw materials or products with more confidence. However, today the most common use of these contracts is speculation, and brokerages have provided a lot of attractiveness for traders by providing leverage (the possibility of borrowing and having multiplier capital). By using futures contracts, traders can also benefit from lower prices.

CME futures and its potential impact on ether prices

The Ethereum futures market on the Chicago Mercantile Exchange is a good option for companies to invest in Ethereum, as it allows them to invest in Ethereum in the same way they invest in the traditional Chicago Mercantile Exchange markets. However, this may not always be a positive price event.

As mentioned above, in 2017, just one day before the start of bitcoin futures trading on CME, the price of bitcoin reached its historic peak, and on trading day, the long-running bitcoin trend began.

In October 2019, the former chairman of the US Commodity Futures Trading Commission (CFTC), in مصاحبه‌ای He acknowledged that the Trump administration had allowed bitcoin futures to be released in order to break the digital currency “bubble” and bring it to its true price. According to him, investment companies trade according to logic, and if they know that an asset is not traded at its real price, they try to take advantage of lower prices.

Therefore, تاریخ if history repeats itself ‌, the price trend of Ethereum will be up until February 8, after which the downward trend of this digital currency will begin.

However, it should not be forgotten that the digital currency market is no longer in the state of 2017 and the infrastructure of this market has expanded greatly. So what happened to Bitcoin three years ago may not happen to Ether, and it may continue to rise. After all, this week is likely to be a volatile one for Ethereum.

This article is an analytical article and should not be construed as a trading signal or an investment offer.

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